Utilities look to renewables as natural gas dwindles

Posted: Sunday, May 01, 2011

By Tim Bradner

Despite its high costs, renewable energy is a good risk-management strategy for Southcentral Alaska electric utilities, which currently depend heavily on natural gas for power generation. The problem is natural gas reserves are running down, and the only near-term guaranteed fall-back is imported liquefied natural gas.

It's not a good position to be in.

Renewable energy -- wind, hydro and geothermal -- can be expensive at the front-end but its key advantage, in the long run is that the fuel is free, Chris Rose, executive director of the Renewable Energy Alaska Project, an advocacy group, told the Anchorage Chamber of Commerce April 25.

"Bradley Lake hydro is now the cheapest power in the Railbelt grid but it didn't look that way 20 years ago when the dam was built. At the time it didn't seem to pencil. It was expensive to build and natural gas was still cheap," Rose said.

The state and the Railbelt utilities partnered to build the Bradley Lake dam near Homer anyway. Natural gas prices have since doubled from what they were 20 years ago but the cost of Bradley Lake hydro power has been stable and low, Rose said.

It didn't come up in the discussion at the chamber, but Cook Inlet Region Inc.'s planned $160 million Fire Island wind project and CIRI's difficulties in securing power sales agreements with local utilities, was clearly on peoples' minds at the chamber lunch.

Rose said he didn't want to talk about individual projects, but that his message is that the Railbelt needs a diversified basket of renewables to offset its overreliance on fossil fuels.

If it's just business-as-usual, and aside from the gas supply issue, Alaskans in the Railbelt communities will spend an estimated $60 billion to purchase fossil fuels over the next 20 years, money that flows out of the state's economy, and this doesn't assume any increases in price, Rose said. "I don't want to think about the next 20 years," he said.

In rural Alaska, where communities are heavily reliant on diesel, $6 billion will be spent. However, rural communities, with the help of the state, have embraced a robust renewable energy strategy.

There are about 30 wind projects operating in rural communities in combination with conventional diesel generation.

While a portfolio of energy supplies is important, conservation is key, and Alaskans have proven successful in this. The state's popular energy rebate program, which refunds homeowners' investments in energy efficiency, is a demonstrated success.

The state has mandated energy efficiency measures for public buildings. These things are important because studies show that about 50 per cent of the total "life-cycle" cost of a structure over time is in operating costs, and much of that is in heat and power, Rose said. Only about 17 percent of total costs is actual construction.

The good news is that a variety of renewable energy options are available to utilities in Southcentral and Interior Alaska, Rose said. There is the Fire Island wind project and also a potential geothermal resource at Mount Spurr.

Ormat Nevada, a geothermal company, plans to resume testing this summer at the site, located 75 miles west of Anchorage. If plans for $20 million in state funding come through, which Ormat will match with $5 million, there will be a series of deep commercial-scale test wells drilled in 2012 to fully evaluate the potential.

Mount Spurr could provide 50 megawatts to 100 megawatts to the Southcentral grid, Rose said, although a 40-mile transmission line would be needed to Chugach Electric Association's system at the Beluga River power plant.

The advantage of geothermal is that it is steady, unlike wind power, which varies with the wind. Geothermal power projects are typically online 99 percent of the time, which beats even gas-fired power generation, Rose said.

There are other wind projects that could feed power into the Railbelt grid. One is a project near Healy being evaluated by Golden Valley Electric Association of Fairbanks. Another is at Delta, east of Fairbanks, where a private firm hopes to expand an existing small wind project.

Integration of variable wind power into a local grid, which requires the assurance of steady, reliable power, is always a challenge, Rose acknowledged. Kodiak Electric Association has solved this and has successfully combined wind and hydro to become almost completely free from reliance on diesel, he said.

Kodiak now has large three wind turbines operating and hopes to install two, and possibly, three more. Kodiak's renewable energy portfolio has meant that its utility has not had to purchase about 1 million gallons of diesel a year, which at its bulk-purchase price of $2 a gallon works out to a $2 million annual savings, Rose told the chamber.

There's now a lot of discussion about a large Watana dam project on the Susitna River, which could be an important long-range asset, but even this isn't a silver bullet. Susitna would have a capacity of 600 megawatts, but hydro projects typically produce, on average, about half of their technical capacity, which would work out to 300 megawatts for Susitna.

In winter when water flows are lower, this will be even less, perhaps 180 megawatts, Rose said. The Railbelt's current electrical demand averages about 600 megawatts but in winter it gets up to about 800 megawatts of demand.

What that means is that a combination of power sources are needed. "There's no one magic bullet for any of this," Rose said.

There are smaller hydro projects in the region, too, such as one planned for the south fork of Eagle River.